Article excerpt

In the name of capitalist hero Adam Smith, Americans are told to
shop 'til they drop to stimulate our economy. But Smith actually
condemned vanity-driven consumption. Are we building our economic
recovery on the sand?

In virtually all current political debate concerning the
requirements of American prosperity, the classic argument of Adam
Smith remains the fashionable mainstay of conservatives. It was
Smith, after all, who reasoned capably and persuasively that a
system of private property, although naturally unequal, would
nonetheless permit the poor to live tolerably.

Rejecting Jean-Jacque Rousseau's fully contrary position that, in
commerce, "the privileged few...gorge themselves with superfluities,
while the starving multitude are in want of the bare necessities of
life," Smith saw in capitalism not only rising productivity, but
also the ultimate condition for political liberty.

Significantly, perhaps, Adam Smith published his "Inquiry into
the Nature and Causes of the Wealth of Nations" in 1776. A
revolutionary book, "Wealth" did not aim to support the interests of
any one class over another, but rather the overall well-being of an
entire nation. Smith discovered, of course, "an invisible hand," an
utterly unsought convergence whereby "the private interests and
passions of men" will lead to "that which is most agreeable to the
interest of a whole society."

Through capitalistic modes of production and exchange, therefore,
reasoned Smith, an inextinguishable social inequality might still be
reconciled with broad human progress.

But today's conservative defenders of Smith usually ignore,
either deliberately or unwittingly, the full depth of his rather
complex thought. A system of "perfect liberty," as Smith called it,
could never be based upon any encouragements of needless
consumption. Instead, he argued, the laws of the market, driven by
competition and a consequent "self-regulation," strongly demanded a
principled disdain for all vanity-driven consumption.

"Conspicuous consumption," a phrase that would be used more
effectively by Thorstein Veblen at the start of the 20th century,
could thus never be the proper motor of economic or social
improvement.

Can Adam Smith save your marriage? Four steps of 'Spousonomics'

To be sure, Adam Smith understood the dynamics of conspicuous
consumption, but (and this part is widely disregarded) he also
loathed them. For him, it was only reasonable that the market
regulate both the price and quantity of goods according to the final
arbiter of public demand. Yet, he continued, this market ought never
to be manipulated by any avaricious interferers.

More precisely, Smith excoriated all who would artificially
create or encourage contrived demand as mischievously vain meddlers
of a "mean rapacity."

An economic recovery built on the sand

Today, of course, with engineered demand and hyper consumption as
both permanent and allegedly desirable market features, we have lost
all sight of Smith's "natural liberty." As a result, we try,
foolishly and interminably, to construct our economic recovery and
vitality upon sand. Below the surface, we still fail to recognize,
lurks a truly fundamental problem that is not economic, fiscal, or
financial. Instead, as Adam Smith would have us understand, it is a
plainly psychological or human dilemma.

200 Years Later, AdamSmith Still Shows Way to Progress
By Paul A. Samuelson. Paul A. Samuelson, institute professor emeritus of economics Technology, won the Alfred Nobel Memorial Prize . He has often served as an economic adviser to Democratic presidents and presidential candidates.The Christian Science Monitor, July 31, 1990